1. You mention doing other hobbies which I assume means stuff scattered around for various projects. (Don't tell me you do one at a time or are a neat freak!!!) How tall are the side walls to the shed? How high do you shuffle stuff around, i.e. flipping things over, moving wood around, etc? I can't imagine trying to do that in my shed, even if it were 2 ft higher than it's 7 ft center height. If you could build a platform in front it may help, especially if you can put removable cover over it (to please HOA).
Linseed oil sitting in a bowl, or spread on the surface of wood, is perfectly safe. But a linseed oil soaked rag provides a vastly increase surface area, so the oxidation happens faster, and the rag can provide insulation, trapping the heat. The increased temperature speeds up the oxidation even more, which raises the temperature even more, and the runaway feedback can quickly result in temperatures that will cause the rag to spontaneously burst into flame. This isn't one of those "do not drive car while sunscreen is in place" warnings. This is one of those "keep your finger off the trigger until you have the gun pointed at something you want to shoot" warnings. Rags soaked in linseed oil will catch fire, if you don't handle them properly, and they can do so far more quickly than you might think.
What I did, when I came back, was to clamp down the strip where it had torn away, and then to start routing from the other end. I still moved the router from right to left, but I did it in six-inch sections, taking light passes, and sort of whittled the strip flush. As the sections I was working were farther to the right, the strip was thinner. Eventually I came to where I was trimming the strip away entirely, at which point I took off the clamps and the remainder fell away.
Synopsis: No room in the garage? Basement not an option? Consider what Ken St. Onge did when he needed shop space: He bought a prefabricated shed and converted it into his full-time woodshop. Because a pre-built shed doesn’t need a cement foundation and is built in a factory, it’s much less expensive than building an addition or stand-alone shop on your property. It can have taller ceilings than a garage and bigger doors than a basement, both big pluses for a woodworker. You can put a shed just about anywhere, too. Here’s a soup to nuts look at Ken’s experience, so you can gauge whether a shop in a shed is right for you.